09 November 2021

Keynes on How We Tend to Save More and Invest Less Than We Should (And on how old ideas should be exorcised by new)

From John Maynard Keynes' General Theory of Employment, Interest and Money.

"... there has been a chronic tendency throughout human history for the propensity to save to be stronger than the inducement to invest. The weakness of the inducement to invest has been at all times the key to the economic problem. To-day the explanation of the weakness of this inducement may chiefly lie in the extent of existing accumulations; whereas, formerly, risks and hazards of all kinds may have played a larger part. But the result is the same. The desire of the individual to augment his personal wealth by abstaining from consumption has usually been stronger than the inducement to the entrepreneur to augment the national wealth by employing labor on the construction of durable assets…."

Meaning? The impulse to save is greater than the impulse to invest, to put capital to work to create something new. To me that is affirmation that we need initiatives to invest more than people naturally do.

He continues,
"One recurs to the analogy between the sway of the classical school of economic theory and that of certain religions. For it is a far greater exercise of the potency of an idea to exorcise the obvious than to introduce into men’s common notions the recondite and the remote…"

Meaning? The ideas that exorcise obviously bad practices are more powerful than ideas that are esoteric.

How can you not love Keynes?